Dead Aid: The Goldman Sachs Solution for Africa?

June 6, 2010

Dead Aid: Why Aid makes things worse and how there is a better way for Africa.
Dambisa Moyo
Penguin Books London © 2009
Rating One Star – Disappointing

I found this much-publicized book highly disappointing. Could such a complex subject be presented in a 150 page paperback? After reading Dr Moyo’s book my conclusion was a resounding no. Good thoughts and information is hidden within this book but the logical framework is often circular and makes frequent use of formal and informal fallacies. The forward written by Niall Ferguson is a well organized summary of the book which should have been used as an outline for the much needed second draft.
The remedies offered for the failures of aid are interestingly simplistic but for the most part are not new ideas but current events. Dr Moyo is credited with having worked at Goldman Sachs for 8 years and the world bank for 2. One of her solutions is that African governments should reject support from the World Bank and IMF. The alternative means is to generate cash by issuing government bonds, African sovereign debt. Goldman Sachs her former employer through unethical but legal procedures helped misrepresent the sovereign debt of Greece so it could become part of the euro zone. Now Greece has had to take one trillion dollars in aid from the European Union and the IMF. This is ironic for several reasons. The figure of 1 trillion dollars the amount Dr Moyo says has been wasted on Africa over 50 years is the amount that is pledged to bail out this single European country. Greece is being moved from sovereign debt to IMF debt; the inverse of Dr Moyo’s solution for Africa. It might be a propositional fallacy on my part to argue that because Dr Moyo worked at Goldman Sachs that the African use of sovereign debt should be rejected but before her advice is taken by African countries or before the reader accepts her conclusions, it would be interesting to know if she was one of the economists who facilitated the Greek financial tragedy.
Moyo starts “Dead Aid” by excluding the charitable work of NGO’s and the relief of natural disasters. This is a major failing of the book as those who listen to her interviews and like me read the book assume she is discussing charity. She excludes the work of NGO’s and international organizations as too small to warrant discussions. As someone who has worked in this sector for 35 years I am skeptical of this assertion which is presented without any figures to support this conclusion. The statement that relief work is obvious, beyond reproach and therefore requires no critique is extremely naïve. So the sector of aid in which I participate as International Director of the Canadian Network for International Surgery was excluded from this book but tarred by the same brush as her criticism of other types of aid.
Her criticism is largely directed at of bilateral (government to government) and multilateral (eg. UN to government Aid) As an economist Moyo only looks at economic development. She does not address the issue of health, education and quality of life. Macroeconomic indicators do not correlate well with overall development. Advances in education and health have been made even in the face of poverty.
Military aid which can hardly be considered development aid is included in the failings of bilateral aid. Did anyone think that military aid to corrupt regimes during the cold war would result in economic development? There is nothing more contrary to all forms of development than war. She does not question or differentiate military and other political aid within the transfer of monies to African regimes. This lack of nuance is another major failing of this work.
Moyo effectively presents the problem of lack of accountability for aid and the fact that in spite of fraud corruption and theft western governments have continues to provide money to these regimes. Her point that accountability which is lacking should be required is clear. She also discusses the conflict of interest by the civil servants who work for the donors. To keep their jobs and to obtain promotion they allow their governments who have objectives other than development to continue to provide fund which they know will not promote development. .
Although the reviewers on the cover of the book talk about rigor and hard evidence Moyo’s solution is developed with a hypothetical country “Dongo”. This was unnecessary and unhelpful. Africa is not uniform and the creation of this fictitious nation reinforces the stereotype that Africa is the same everywhere. Moyo supports the use of sovereign debt , direct investment of promote trade, the removal of subsidies from American and European goods and the promotion of local financial means including microfinance and land reform. All of these ideas have merit and certainly Africa should develop the diverse strategies that other continents use but none of these ideas are new.
She notes a few African countries have issued bonds but most do not because Aid money is cheaper and does not come with enforceable conditions. Trade within Africa is almost nonexistent and international trade , direct investment from non Africans are hampered by bureaucracy and poor infrastructure Most of the strategies promoted are in the hands of African governments which Moyo correctly notes are with few exceptions corrupt and self serving.
I was convinced that aid given to governments without accountability does maintain corrupt regimes. Her complaint that Jeffery Sach’s and Bono’s promotion of aid increases without accountability will fail seems logical. The problem that Moyo presents is not the failure of AID but that much of aid is not aid. I would re-title this book “Fake Aid”. Fake aid is money that was not and is not intended for development but to bribe client regimes. This will only promote corruption and undermine development. Her conclusion that there are other modalities to development than aid is correct but I was not convinced that aid should be cancelled just that it must be done better. The book concludes with a call for an end to corruption and an end to western governments turning a blind eye to the misuse of their taxpayer’s money. She also calls for a proactive economic approach by African governments who actually serve their people. The problem is that most Africa governments see their own survival and the greed of the cleptocrats as a higher priority than the well being of their own people
I cannot recommend this book. However you may want to read it to be aware of the books limitations to counter those who use it to condemn all forms of development aid.

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  1. Great review for a book that clearly misses the point. Well done.

  2. Thanks Jim. Forward the URL for this review please. The poor thinking in this book is detrimental to legitimate development activities.

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